A stationary bike inside a Peloton store is pictured in the Manhattan borough of New York City, the United States, on January 25, 2022.
Carlo Allegri | Reuters
Group quietly removed the unlimited free subscription tier of its fitness app less than a year after its debut because the initiative was failing to convert users into paid subscribers, the company said.
In recent weeks, Peloton has dropped its free option for new users, once a key part of the company’s growth strategy. People who signed up for the company’s free unlimited membership before it was removed will continue to have access to it, Peloton said.
New users looking to train with the company’s app now only have access to two tiers that cost $12.99 per month or $24 per month, with the option of a seven-day free trial.
Last May, Peloton launched a splashy rebrand that presented the company as a fitness company for everyone and put its digital app at the center of its marketing campaign. The rebranding brought a new tiered app strategy that included the unlimited free subscription option and two more paid tiers that all had different levels of content.
The rebranding came as CEO Barry McCarthy sought to transform Peloton from a company focused on its hardware to one equally invested in its app. As the company’s sales steadily declined, it was working to acquire new customers who may have been intrigued by the brand but were unwilling to shell out thousands of dollars for its equipment.
McCarthy, a former Netflix AND Spotify executive, had long wanted a free tier on the company’s app. He bet that free users would fall in love with Peloton’s content and then opt for a paid subscription, which includes a much wider variety of classes, after trying the app and deciding they wanted more.
The gamble appears to have been a failure.
McCarthy told investors in November that the relaunch had been “less successful in engaging and retaining free users and converting them to paid subscriptions” than the company expected.
Shortly after, the unlimited free tier was no longer available.
During a Morgan Stanley At the March conference, finance chief Liz Coddington said the company learned “quickly” that the free tier was “cannibalizing” efforts to convert free trial members into paid subscribers, which led the company to switch to a free trial model.
“It’s important to know that our app is still in development. We still have many opportunities to improve it,” Coddington said. “What we’ve found is that we need to find ways to engage them better during the trial period, for them to convert to paid services and then keep them engaged over time, so that they will maintain a higher pace… When we do that, we believe that our marketing efficiency will improve, both because we will achieve better loyalty and better conversion rates.”
While app subscribers declined during Peloton’s fiscal second quarter ended Dec. 31, Coddington said the company “still believes[s]” in its apps strategy and remains “an important part of the business.”
Peloton shares were down more than 6% on Monday and more than 45% this year, as of Friday’s close. The company’s market capitalization has shrunk to about $1.2 billion, a fraction of the $47 billion it was worth at the height of Peloton’s success during the Covid-19 pandemic.